Friday, October 24, 2014

1. I guess this November and December are shaping up to be like last year's November and December?

2. Why is volume up 10 times over the past year? Anyone have any idea at all why this should be? It's not just the ratio chart: GDXJ volume itself is up like 10 times in the past year. Is this just bots arbing an otherwise dead market for junior gold equities? Are bots the only people left holding junior miners?

And he posted something last week that was very interesting. This chart:

shows you how mind-numbingly stupid this market was last week.

Let's go through the stupidism one at a time:

21.6% of people were scared of the end of QE and the "Fed safety net".

That's because they don't understand that the end of QE means monetary normalization, which is a good thing. And it means Janet Yellen has decided the US economy is strong enough to start taking the training wheels off, which is a good thing (as long as you're not one of those clowns who thinks he's so much smarter than Janet Yellen). So 21.6% of the market are morons.

But wait!

Another 15.5% of people were scared of the Ebola virus.

That's because they don't understand that Ebola only spread in Dallas because Presby Hospital's management were criminally incompetent assholes (really, in my country they would be under investigation right now) who forced nurses to use insufficient equipment. Trust me, the CDC is now coming down on the entire health care industry like a ton of bricks.

So 37.1% of the market are morons.

But wait!

Another 15.2% of people are scared because TA.

They're also morons. No explanation required. If they're scared based on the 200SMA, they're simply morons.

So 52.3% of the market are morons.

But wait!

Another 9.4% of people are scared because of a weak US economy.

They're also morons. Read New Deal Demoncrat and Calculated Risk, and get yourself some real economic data instead of the bullshit that that fucking clown Joe Kernen spouts out of his ignorant Republican mouth on CNBC.

So 61.7% of the market are morons.

OK, the next 7 things in the list are things you might want to be worried about. But only 38.3% of the market are worried about them.

Thus, by math, the market had 161% more fear in it than it should have had.

Investors flocking back to equities are asking what changed to ignite a plunge that erased $2 trillion from American stock values. While falling oil prices spurred a 20 percent drop in energy producers, cheaper fuel is now underpinning a rally in airlines and railroads that is approaching 10 percent. Data showed gains in home sales and consumer confidence and earnings from Apple Inc. (AAPL) to Morgan Stanley exceeded analyst estimates.

“It’s not like we suddenly had a different macro-economic picture,” Justin Golden, a partner at Lake Hill Capital Management LLC in New York, said by phone. “The markets started to roll over and there was forced panic.”

There's a difference between rational expectations and irrational panic.

FT Alphaville - now that everyone's a volatility seller.... Izzy Kamizzy has decided that all of a sudden it's interesting to question the buying of short $VIX ETPs. It would be nice to see some real data and some in-depth discussion of the topic of XIV's market cap and its effect on volatility; a lot of the VIX blogs (like vixandmore) did go into the details a few years ago, but the trade is a lot larger now. I personally think it's really just an arb between short-term irrational fear and long-term rational expectations. After all, why should $VIX spike to 30 just because Presby's management are assholes?

S Club
Gettin' down tonight, a come on, yeah
Gettin' down tonight, uh huh, everybody
Get down tonight

S Club (there ain't no party like an S Club party)
Gonna show you how (everybody get down tonight)
S Club (there ain't no party like an S Club party)
Gonna take you high (shake your body from side to side)

S Club (there ain't no party like an S Club party)
Gonna show you how (everybody get down tonight)
S Club (there ain't no party like an S Club party)
Gonna take you high (shake your body from side to side)

O-oh O-oh! Throw your hands in the air
O-oh O-oh! Like you just don't care
O-oh O-oh! There's a party over here
O-oh O-oh! There's a party over there

Tina's doing her dance
Jon's looking for romance
Paul's getting down on the floor
While Hannah's screaming out for more (ooh hoo!)
Wanna see Bradley swing
Wanna see Rachel do her thing
Then we got Jo, she's got the flow
Get ready everybody 'cos here we go!

S Club (there ain't no party like an S Club party)
Gonna show you how (everybody get down tonight)
S Club (there ain't no party like an S Club party)
Gonna take you high (shake your body from side to side)

O-oh O-oh! Throw your hands in the air
O-oh O-oh! Like you just don't care
O-oh O-oh! There's a party over here
O-oh O-oh! There's a party over there
O-oh O-oh! Throw your hands in the air
O-oh O-oh! Like you just don't care
O-oh O-oh! There's a party over here
O-oh O-oh! There's a party over there

Ghetto boys, make some noise!
Hoochie mamas, show your nanas!

S Club (there ain't no party like an S Club party)
Gonna show you how (everybody get down tonight)

S Club (there ain't no party like an S Club party)
Gonna show you how (everybody get down tonight)
S Club (there ain't no party like an S Club party)
Gonna take you high (shake your body from side to side)

I especially like the phrase "Hoochie mamas, show your nanas", which remained unsurpassed in the lexicon of Western literature until K.R. Sebert's reactionary stanza

I'm fresher than that Gucci
the boys they want my coochie
I say 'no, I'm no hoochie'.

I for one am happy to see the children of today learning about the need for hoochie mamas to show their nanas, instead of refusing boys their coochies as the leftists of today would suggest.

Next week, we'll continue with an analysis of William Adams' "I'ma be a brother but my name ain't Lehman, I'ma be a bank, I be loanin' out seamen", a biting commentary on the class tension between capitalist and proletariat that informs and mediates today's merchant seafaring.

IKN hears that one of the lawyers deeply involved with the HudBay (HBM) takeover of Augusta (AZC) is about to have nasty things happen to him because the US SEC has caught him with his fingers well and truly in the cookie jar, trading shares of AZC with insider knowledge. And yes, IKN knows the full name of the naughty boy.

IKN's on the road again, doing due diligence on a couple Peruvian distilleries with strong growth prospects, so I'll add the following:

Augusta was the one that had that Rosemont property in Arizona that the environmentalists from Save The Scenic Santa Ritas were opposing.

While insider trading by lawyers is bad and all, the SEC should really look at how the environmentalists issued that news release last November that caused the stock price to tank based on wholly false and misleading information.

What's worse? A lawyer who makes $100K on a side trade with insider info, or an environmentalist group who wipes a hundred million off a company's market cap by issuing a press release with falsified material information that induces shareholders to sell at a loss?

Now, I'm not in favour of insiders making money trading on inside information, and I also work to protect the environment. But if the SEC wants to be serious about protecting the integrity of the capital markets, I think it should do what it takes to get at the heart of this SSSR story from last year.

Hey, after all, maybe the Save the Scenic Santa Ritas group were simply stooges being paid by some company who wanted to buy out AZC at distressed prices? We'll never know if it never gets investigated, right?

Things were up at the open, but have drooped as USD went up and oil & high-yield went down. As usual. Dunno if things are going to continue like this, but I added $10K in an S&P index ETF. I can always flip it out to short-vix if we get another fear spike.

And by the way, for all you in the press:

#1, it's stupid to blame a stock selloff on a lone nut with a gun in Ottawa. That has no impact on the economy.

#2. it's callous and ignorant to blame a stock selloff on a lone nut with a gun in Ottawa.

Now here's some news:

BI - Caterpillar Q3 earnings beat. Don't trust Sam Ro's take on it, though, because he's admitted he couldn't pay attention to the presentation because of all the awesome pictures of dumptrucks and stuff.

Gavyn Davies - China's slowdown is secular, not cyclical. Sure, though I still think it'll be more of a Korea slowdown, not a collapse. In any case, yes you can't extrapolate 8-10% growth forever: China's not going to overtake the US in per-capita GDP. Ever. In any case, figure out how much physical plant China still has left to build before they can compare to Korea in 2001.

Dong Yang, secretary general of the state-backed China Association of Automobile Manufacturers, said total passenger and commercial vehicle sales for the full year would likely hit 23 million units, or an increase of about 4.6 percent. In July, the group lowered its projection for the increase in China vehicle sales to 8.3 percent, or 23.83 million units, down from the 10 percent increase it predicted in January.

So if the forecast is for 830,000 fewer units sold, and sales are still up 4.6% year-over-year, you don't spin the article as doom & gloom and a validation of a China hard landing thesis.

Helping with this objective analysis is SentimenTrader, who looked at every intermediate-term S&P 500 low of the past 20 years (there were 26 of them). They recorded the level of their comprehensive set of indicators on those dates, and compared them to the market's current condition. As of day's end last Thursday, 51% of their 85 indicators matched or exceeded the extremes set at other lows (it dropped a bit through Friday).

OMG objective analysis! Sell sell sell!

BI - Joey the Weasel defects to Bloomberg. Good riddance, Joey, and I won't be reading you or Bloomberg. Blodget, please try and replace him with someone who isn't a click-whore. And see if you can get Udland and Ro to leave too. Keep Mamta.

Well, yesterday the October $VIX options got doohickeyed, and today the $VIX has started popping again:

I didn't want to sell over the lunch hour, because that's Mom & Pop Act Dumb hour, but with a mental stop at $24.50 on HVI I eventually felt I had to. Things were starting to look downwardly mobile, and the $VIX future curve is flattening again on the near end. Plus you can see a long upward line on that chart above, from end of August through to today, that it seems the market won't let $VIX break below.

And maybe there was a distortion in the $VIX due to the option expiry.

So, a quick $2000 win for me, and I'll wait for the chance to either reload a $VIX short or just buy more US equities on the cheap.

Maybe I'll wait for something stupid like UNP getting puked down 10% again before I buy back in? I dunno.

With the usual caveat that the following is for information purposes only, I am not a licensed securities dealer and this is not meant as a recommendation to buy or sell securities:

OK, so Union Pacific has popped all the way back up, so there's no point in buying it now.

Magna has only recovered a third of its drop, but it's only got about another 18% left on the table for it to get back to its August high.

But look at this:

Really?

Here's the weekly:

Are you serious?

So the market is saying it considers Ford's outlook to be as terrible as it was in May 2013. That looks silly to me.

Apparently part of this is based on Ford's decision to redesign its light trucks using aluminium. Apparently the market thinks that aluminium trucks are for wimps, and those butch sweaty men in home construction will prefer nice heavy steel trucks from GM.

Apparently engineers have no idea how to build things out of aluminium.

I dunno. I'm not buying, just cos Canadian banks like taking 3-5% or something off the top when you buy US stocks. But this chart just speaks silliness to me.

My god, I just looked it up and they don't teach ratios in Ontario until grade eight.

I remember I did long division in grade four: I remember because it's the first time I had trouble in math. Why do we need to go four years between long division and ratios? What are we teaching our children in the meantime? Has grade school devolved into nothing but drool bibs, construction paper and Marxist-Leninism?

"This could be a thing. If it is, gold doesn't go up any further unless copper comes to the ride, too" is incorrect, old fig. That is only one condition that meets your red-line-over-a-squiggly-line proposition.

The other condition is that both gold and copper go down from here, but gold goes down slightly faster than copper.

Since your proposition and inference have the apparent goal of justifying a bullish stance toward copper, I felt I needed to point out the alternate possibility.

And the alternate possibility is more likely if we're in a secular bear market for commodities.

But it's all just "technical analysis" anyway, so you may as well go buy yourself a Tarot deck and play with that.

Tuesday, October 21, 2014

Jon Krinsky’s technical note for MKM Partners this week is entitled “The Game Has Changed… V-Shaped Bottom Unlikely” and, while not bearish, he is very skeptical that last week’s low will be the low for the current correction. He notes that breadth was terrible despite Friday’s bounce and that we’ve now spent a week below the 200-day moving average – which hasn’t happened since the current rally began in 2012.

The usual format of a chart first, then sarcasm about the chart second:

Remember how tech was a disaster area, and all these stocks were grossly overvalued because the NASDAQ had run up far too much? Cuz that was the story as late as Thursday.

What's changed?

Remember how Ebola was going to kill America, and weakness in Europe meant coming weakness in the US, and China was going to crash, and the dropping oil price was indicative of an oncoming worldwide deflationary spiral, and etc.? Cuz that was the story as late as Thursday.

What's changed?

Transports? I mean, really? Did the rail loads numbers indicate a 10% collapse in rail traffic?

It seems that the early October apocalyptic dry-retching of stocks was the pause that refreshes, and we can all wade back in, eh?

Lefsetz has a lot of the general "it's a new era, baby" thinking right, but is also full of bullshit when it comes to his own recollection of the glorious 60s and 70s.

There were very few albums in the 1960s and 1970s that were worth buying as albums. Very few deserved their multi-platinum status. Let's see if we can list them: Aqualung, Dark Side of the Moon, Led Zeppelin IV, um... The Lamb Lies Down on Braodway, Animals, Wish You Were Here... um...

Half of those were Pink Floyd, incidentally.

Yes, there were other albums that were nice to buy, they had a few good songs on them. But Sgt. Pepper wasn't an album, just a collection of very good songs. Even in the Quietest Moments wasn't an album, just a collection of really good songs. Most albums that went platinum were just collections of 10-14 good songs.

Or rather, they were a collection of songs, some number of which between 0 and 14 were good.

Which is all that the albums of today are, to the extent that albums still exist.

And I don't buy albums anymore, I go on Youtube and stream everything, yes. I was half-interested in buying a hardcopy of Lana Del Rey's Born to Die, which is as close as you get to a modern-day equivalent of the whole-album experience like Aqualung. But that would mean reassembling my stereo, which I took apart and put into the closet when its shelf broke.

Oh and by the way, Bob? Born to Die has apparently sold 4 million copies. Compare that, please, to your little buddy Miley Cyrus, the manufactured pop-star of the old 60s-70s system, who only sold 1.7 million copies of Bangerz.

Remember how you dumped the hate on Lana Del Rey and called her career over after that SNL performance?

Well, Miley Cyrus swung naked on a wrecking ball, rubbed her bum against Robin Thicke's crotch on TV, and spent six months sticking her tongue out, and all that did was give her less than half of Lana's sales. All that work and no payoff! Didn't she do everything that you tell acts to do?

What did Lana Del Rey do? Apparently she wrote better songs. She certainly didn't get more media exposure!

And you said Miley was a better singer? You did. You said that her version of "Summertime Sadness" was way better than Lana's.

Does that mean that the public are stupid idiots who don't have any musical taste? Now that the people have been freed from the payola system, now that music distribution is pull and not push, now that the pipe has been widened and narrowcasting has usurped broadcasting, are we now seeing the utter lack of taste of the people?

Or is it instead that the record industry hacks like you are the ones who never had any musical taste? Was Seymour Stein really the only person in the US recording industry who had any taste whatsoever? Maybe the people have all the taste?

Tell me, Bob: why is electronic music suddenly ruling the charts? The Swedes who are pumping out nearly all the good songs of today were making this exact same music 20 years ago: I saw it all on mp3.com. There is literally no difference between Avicii and a 90s European basement studio act like... I dunno, Karoly & Monica, or Nina Goddess of Dance. In fact I'd even say the 90s-00s basement stuff was often better than today's.

So why is it that Eurodance has finally made it into the US top 10? Is it because you record industry hacks have finally lost control of the charts and the masses have taken over?

I used to hate top 40, with a passion. It was garbage. I knew it was garbage. I spent nearly 30 years hating top-40, starting in adolescence. The only time top-40 was slightly passable for a while was in the early 90s, after the mafia had quit running payola and before the record companies set up the new payola system with the regional promoters.

But recently I've even been going to Youtube and watching the weekly Billboard Top 50 summaries, because I'm finding so much amazing music in the charts.

Would you have let Tove Lo's "Habits" be a single 20 years ago? Or 10? Or 5 years ago? Even after Lady Gaga, your buddies would never have allowed lyrics like those on the air.

And you wouldn't have gone to Sweden to find your female singer/songwriters. You would have picked up the first pretty Jewish girl you saw at an Upper West Side open mic night.

Shit, 30 years ago you didn't even let women on the air if they dared to write their own songs.

Or what about "Hey Brother"? Dammit, it's a bluegrass song, it's not even electronic! How did it get to #16 in the Hot 100? When's the last time a bluegrass song got into the top 20? How did it sell well over 2 million copies?

And how about Icona Pop's "I Love It"? Would you let 2 girls' distorted voices over a chiptune sound get onto the charts? No, you would have laughed them out of your office and told them to maybe send a tape to K Records or some other basement operation.

And Sam Smith? Would you have let a gay dude sing a sad gay love song? "Stay With Me" hit #2. The dude's gay. You gatekeepers of 70s and 80s and 90s culture wouldn't have even let him on the air.

Shit, just a few years ago, you gatekeepers of American culture threatened to dump Katy Perry's contract if she insisted in using "I Kissed a Girl" for her debut single. And look how that worked out.

And why aren't we buying albums?

Well, we bought Born to Die. That was an album. Maybe none of the new stars have put out enough consistently different and interesting music this year?

Or maybe 99% of the albums that you hacks forced down our throats in the old days were crap that didn't deserve to go platinum. Maybe the people want good songs, not good albums. Maybe you've got to be someone special like Lana Del Rey to get people to buy a whole catalogue instead of 1 or 2 tracks.

Can you hum a few bars of Genesis' "The Chamber of 32 Doors", or Jethro Tull's "Up to Me"?

The 60s and 70s were garbage. The music was garbage. There were a few musical greats, but even most of what they did was garbage. Todd Rundgren and Joe Walsh and Ray Davies and Frank Zappa and Neil Young were towering geniuses who I've got nothing but respect for, but even most of what they put out was garbage, and I bet they all admit it in private, even Todd.

But today the people are in direct contact with the music. There are no more intermediaries and gatekeepers. The parasites have been expelled from the system. It's no longer a "selling vinyl" system, it's gone back to a "people listening to music they like" system.

And you guys from the industry slit your own throats by force-feeding garbage to several generations of listeners. You force-fed us garbage, and you taught all your recording artists to put out nothing but garbage.

If not one album goes platinum this year, it's not the loss of the people. It's the loss of the parasites who have seen their free lunch walk out into the street and start talking to the fans directly with no intermediary taking his 105% cut.

It's not owned by Joe Sixpack. It's owned by greedy junior hedge-fund clowns who are trying to maintain a debt-equity asset allocation but still outbeta the market, or it's owned by bond fund clowns who are trying to out-beta government bonds.

Selling HYG at $90 last week was stupid, because now that the pressure is off it's bounced back to $93. Which means the clown who sold at $90 was selling at a $3 discount to a reasonable price.

But that $3 discount, for HYG, amounts to 6 months of dividends. So that clown who sold high-yield last week wasn't just trimming a position, he was essentially tearing up 6 months of coupon.

I find bonds unsexy, but I've been taught that the only reason to own them is for coupon. You want to chase capital gains? Buy tech stocks. A rentier charges rent.

So a bond trader or asset allocator puking HYG is spitting in the face of his own profession. He really doesn't know what he's supposed to be doing. He doesn't know why he owns bonds.

We could just be seeing a dump to some longer-term EMA like the 50, as the beginning of a longer-term sideways market. I'm totally open to the idea of sideways, even with the new meme (as of yesterday) that the Santa Claus rally has begun.

Then again, the market going up on bad news from McDonalds and IBM and everyone else is a good sign.

In any case, according to the perspective of a guy who's short the $VIX, that was the bottom and all I have to do now is decide when to cash out. I'm not going to hold short $VIX forever.

Monday, October 20, 2014

In fact, tell you what: I'll wait here while you dash out to the LCBO and fill up your liquor cabinet. Look for the cheapest, most powerful axle grease remover you can find.

Don't bother being posh, don't bother worrying about what it's going to do to your brain. A 24-litre keg of cheap Uzbekistani red wine laced with wood alcohol and mercury is perfectly okay, if you can find it.

Click through when you're done, but be warned this is NSFW even for me:

BI - these countries are screwed if oil keeps falling. Ignore the ignorant crap about what Saudi Arabia does and doesn't want, okay? The real story ran over a year ago. The Saudi royal family is worth a collective $1 trillion, and their mortal enemies are the Shiites of Iran. That's why Saudi Arabia doesn't care about falling oil prices: they'll survive, but Iran won't.

You'll see I changed my Bollinger period to 14 for this chart. That's because 14 gives me a Bollinger mean that seems* to govern the $VIX uptrend.

Cuz if you look closely, the close on $VIX pullbacks ends at the Bollinger(14) mean on three separate occasions.

If the $VIX pop is over, $VIX needs to close at less than 19.6. Prefarably a fair bit less.

I'm kind of worried right now because index ETF volume seems to really have dried up. Anyone who wants to sell into this can really bitch-slap the market. Then again it's not like I can see the book from minute to minute or anything.

Also you gotta wonder about the Pimco selling high-yield in odd-numbered weeks thing that I mentioned in the previous post.

We'll see. QQQ is a hair's breadth away from Friday's high of $93.85 right now. If it pops above, things will look better to me. Welp... just popped above as I typed that. Woops... just popped back down as I wrote that.

* - it's not magic. But it seems** to work, sometimes, until it doesn't.** - There's actually a rational mathematical reason to watch these things. The more volatile your market, the shorter-period the governing EMA will be - that's a mathematical truism. So when your market in something cools down, you'll see it being governed by longer and longer period EMAs until it dissolves into a random walk waiting for the next external torque to set off a new move. Or so it seems.****** - no really, all I'm saying is that if $VIX doesn't drop below the mean, it'll go back above the mean. That seems* to be a pretty ironclad prediction, no? And going back above the mean means $VIX going up, which you don't want if you're short $VIX. So really all I'm doing is elementary momo, not TA.

He thinks it's not the bottom, but he conflates the Euro Collapse Crisis of 2011 with this year's meaningless bout of lemmingness so I don't have a lot of respect for his opinion.

Frankly if this thing were like that thing then we'd be reading about the imminent collapse of something or other, and I've even been checking in at BI and Zerohedge and I haven't found anything written about an imminently collapsing thing yet.

When it comes to high-risk bonds, the asset management giant Pimco has pretty much cornered the global market.

Be it bonds issued by the automotive financier Ally Financial or the student loan financier SLM in the United States, or government bonds in Spain and Italy, Pimco holds a commanding position in these high-yielding securities.

But as Pimco’s portfolio managers double down on their bet that high-risk bonds will thrive in a world of low interest rates, a growing number of global regulators are warning that the positions being taken on by the big asset management firms pose a broad danger to the financial system.

These concerns were amplified this week as stock markets gyrated, the yields of high-risk corporate and European bonds spiked upward and, crucially, trading volumes evaporated.

Regulators and bank executives have cautioned that an accumulation of hard-to-trade, risky bonds by a small group of fund companies could turn a bond market hiccup into a broader rout, in light of how illiquid many of these securities have become.

Stupidest thing in the world that you could ever do is become the market in anything.

Cos then when your psychopathic boss quits and you lose a few billion dollars worth of investors in the process, your selling ends up looking like this:

Doesn't it?

There's no reason for HYG to seesaw down one week, up the next, down the next and up the next, other than that some idiot has become the market and is desperate to balance their books.

I guess, if Pimco's not sold everything off yet, we'll get another week of weakness this week.

And then that will bleed through to equities because reasons.

Not that there's any reason to even sell high-yield. Because you're supposed to own it for the coupon, not because you're a smartass day-trader. The swings in even high-yield are such that the only way a company like Pimco will make money is by clipping the coupon and reinvesting.

WSJ - 5 reasons to worry about deflation. It's become annoying how everyone is fixated on this article, to the point that it's monopolizing the discussion, so let me respond with this:

1 Reason Not to Worry About Deflation

1. It's not happening in the USA. It's happening in Europe, and even a pinko sociamalist like me admits that Europe's economy is and always has been a clusterfuck. So the fact that Europe's economy is going down the drain shouldn't be news to anyone: it's just reaffirmation of the status quo.

Thank you. Please place my Nobel Prize in Economics over there beside the big stack of furry porn.

Sunday, October 19, 2014

Reformed Borker (Bork Bork Bork!) - here come the best 6 months of the year for investing. One reason the market went down was everyone was reminded that the market goes down in October, and it was no October. So now let's remind everyone that October always closes positive, even despite its crashes, and that everyone likes to be fully invested from November to May, so we can get this idiotic puking out of the way.

BI - Blackrock: here's one reason rates will stay low for a long time. Um, they blame it on technology. I guess we didn't have any technology back in the 1960s and 1970s when inflation was rampant? Obviously nobody at Blackrock has heard of the phrase "liquidity trap" or reads Paul Krugman, so we can now be thankful that they've demonstrated their ignorance for us so that we can ignore them from now on.